Home Retail Group has confirmed a profit decline of nearly a quarter for the first half of 2010.
The group reported a fall in operating profit of 23% to £93m, while profit before tax declined 12% to £103m for the 26 weeks to August 28, 2010.

Operating profit at Argos fell 32% to £54.4m, while its gross margin rate fell by approximately 150 basis points and is expected to be down by 50-100 basis points for the full year.

Sales fell by 6.5% on a life-for-like (lfl) basis due to "particularly challenging conditions for its core customers", according to a statement of results issued today. While the retail chain has seen success in small ticket areas such as toys and homewares, weakness in core customer demand has been "pronounced" in areas such as big-ticket furniture.

Sales at Homebase declined by 0.8% lfl, and operating profit fell 6% to £46.2m. Seasonal categories accounted for more than a third of sales in H1, boosted by improved ranges of garden furniture and BBQs, new selections of outdoor toys and "further improvements to the customer offer across planting and grow your own".

Decorating projects drive a substantial proportion of footfall to Homebase, said the report, while the chain has achieved growth in kitchen, bathroom and bedrooms, with installation services being a key driver.

HRG chief executive Terry Duddy said: "Homebase has completed another good performance in its peak trading period. At Argos, its core customers have been under greater pressure and there were some particularly challenging conditions in certain product categories."

He also said that the group's profit result was supported by further cost management, and added: "We are about to enter our busiest trading period, and whilst we are planning cautiously, we do so from a position of operational and financial strength."

HRG is continuing its investment in both chains, planning more Argos store refurbishments and the roll-out of further installation services at Homebase.

Multi-channel sales are continuing to grow, accounting for 44% of Argos' sales in the first half of 2010. Internet sales at Homebase grew by 40% and now account for 4% of sales.

Argos is currently trading from 749 stores, and Homebase from 345 stores. Four Homebase stores closed in the period, with four more to close in the second half as part of the ongoing management of the portfolio.